In Singapore, having at least one director who is a local resident is a legal requirement for business incorporation, as explained in our article – ‘What Is A Nominee Director And How Do You Appoint One In Singapore?’ However, a company is almost always made up of more than one director. In most cases, a managing director is one of the most important leaders in the company hierarchy as they are responsible for running the day-to-day affairs of the business. In this article, we will discuss the role and responsibilities of a managing director in Singapore.
A managing director is responsible for the daily operations of a company or business unit. They typically lead employees, manage the company’s resources, and help come up with business plans and strategy. A managing director is appointed from among the members of the board of directors. This makes them a top-ranking senior executive of the company.
A managing director in Singapore has considerable control over the company’s operations. A managing director’s job description includes the following:
The role of a managing director carries a lot of responsibilities. First of all, professionals in this position of power must fulfil the following fiduciary or ethical duties:
The terms ‘managing director’ and ‘chief executive officer’ (CEO) are often used interchangeably, but there are subtle differences. In companies that have both positions, managing directors usually manage individual business units whereas the CEO is responsible for the company as a whole. In terms of responsibilities, the CEO is in charge of coming up with business plans and strategy while the managing director helps the CEO implement these plans and closely manages the day-to-day operations of the company. Therefore, one can say that a managing director is more actively involved with the company’s operations than a CEO. As for hierarchy, the managing director takes orders from the CEO while the CEO is appointed by and reports to the board of directors, of which the managing director is also a part.
Appointing a managing director – or even a CEO, for that matter – is not a legal requirement in Singapore. Companies simply choose to give their senior executives these designations to clearly define their roles and responsibilities. But even if their appointment is not a legal formality, managing directors and the companies hiring them must comply with certain legal requirements.
For one, it is mandatory under the Companies Act for companies to maintain registers of all their directors and CEOs and to file these with the Accounting and Corporate Regulatory Authority (ACRA), which keeps these registers in electronic format. Companies must keep their registers current and updated at all times. For example, if a new director has been appointed, the company must file this information on BizFile+ (ACRA’s online filing system) within 14 days of the appointment date. The details to be filed include the individual’s:
Secondly, Singapore has strict disclosure requirements for company directors, including managing directors and CEOs. In keeping with their duty to act for the company’s best, directors must disclose information about any shares, debentures, and rights/options (to shares) they might hold in their company and/or in its subsidiaries. The company, in turn, must enter this information in a Register of Directors’ Shareholdings. A similar Register of CEOs’ Shareholdings must also be maintained. However, unlike managing directors, CEOs are required to disclose their interests only in the company and not in its subsidiaries. Failure to disclose such information or to maintain the registers can lead to legal action.
A managing director is generally appointed by an ordinary resolution passed by shareholders at a general meeting of the company. An ordinary resolution is a formal decision backed by at least 50% of the votes cast at the meeting, either in person or in writing. The resolution states the appointment of the new managing director and the date on which the appointment takes effect. While this is the most common way of appointing a managing director in Singapore, specific details of the appointment procedure are mentioned in each company’s constitution. This is a document that outlines the rules and regulations by which the company will be governed and also states the rights and responsibilities of its directors, shareholders, and company secretary.
When appointing a managing director, companies must ensure their chosen candidate fulfils the eligibility criteria:
A managing director in Singapore may quit by writing a letter of resignation and complying with the resignation procedure laid out in the company constitution. The company needs to inform ACRA of the cessation of the director’s appointment within 14 days and make the necessary changes in the Register of Directors.
To remove a managing director from office before their term is over, the company must get another ordinary resolution of shareholders passed and inform ACRA of the changes within 14 days.
If a managing director is removed for violating their fiduciary (ethical) duties – acting in the company’s best interests, avoiding conflicts of interest, avoiding profiting and abuse of power, etc – they might also face a lawsuit in a civil court. In such an instance, the company can potentially claim compensation for damages caused to the business, demand the payment of profits made or transfer of property acquired by the director while in breach, declare decisions taken by the director as invalid, and so on. Furthermore, conviction can result in repercussions, potentially including fines, imprisonment or disqualification from holding the position of a director again.
Learn more about how to incorporate your company in Singapore in our step-by-step guide.
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